Finance and Poverty: Evidence from India
AbstractUsing state-level data from India over the period 1983 to 2005, this paper gauges the effect of financial deepening and outreach on rural poverty. Following the 1991 liberalization episode, we find a strong negative relationship between financial deepening, rather than financial breadth, and rural poverty. Instrumental variable regressions suggest that this relationship is robust to omitted variable and endogeneity biases. We also find that financial deepening has reduced poverty rates especially among self-employed in the rural areas, while at the same time it supported an inter-state migration trend from rural areas into the tertiary sector in urban areas, consistent with financial deepening being driven by credit to the tertiary sector. This suggests that financial deepening contributed to poverty alleviation in rural areas by fostering entrepreneurship and inducing geographic-sectoral migration.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9497.
Date of creation: Jun 2013
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Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-28 (All new papers)
- NEP-ENT-2013-09-28 (Entrepreneurship)
- NEP-MFD-2013-09-28 (Microfinance)
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- Thorsten Beck, 2013. "Finance, growth and fragility: the role of government," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 5(1/2), pages 49-77.
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